The International Monetary Fund (IMF) projects that Indonesia’s economy will grow by 5.0 percent in 2026, with a slight increase to 5.1 percent in 2027. Meanwhile, the global economy is expected to expand by 3.0 percent in 2026 before gradually rising to 3.4 percent in 2027.
Coordinating Minister for Economic Affairs Airlangga Hartarto said Indonesia’s domestic economy continues to demonstrate a positive trend. Nevertheless, the government is implementing various programs to accelerate economic growth in an effort to achieve its 5.4 percent growth target by the end of 2026.
“Various institutions, including the IMF, the World Bank, and the OECD (Organisation for Economic Co-operation and Development), estimate that our economy will continue to grow at around 5 percent. Overall, they view Indonesia’s economy as relatively safe and resilient,” Airlangga said in a statement in Jakarta on Sunday, July 12, 2026.
According to Statistics Indonesia (BPS), the country’s economy grew by 5.61 percent in the first quarter of 2026. Indonesia’s gross domestic product (GDP) at current market prices reached Rp6,187.2 trillion, while GDP at constant prices totaled Rp3,447.7 trillion during the first quarter of the year.
Economist: Five Percent Growth Is Not Enough for Economic Transformation
Meanwhile, M. Rizal Taufikurrahman, an economist at the Institute for Development of Economics and Finance (Indef), said the IMF’s projection indicates that Indonesia’s economy remains resilient despite the global economic slowdown.
However, he argued that growth of around 5 percent does not reflect the level of acceleration needed to drive meaningful economic transformation.
“Indonesia’s large domestic market, abundant natural resources, and opportunities to develop downstream industries continue to make the country attractive to investors. However, these advantages alone are insufficient without regulatory certainty, exchange rate stability, consistent policies, efficient logistics, and strong institutional quality,” Rizal explained.
He emphasized that the government’s challenge extends beyond maintaining stable growth. It must also improve the quality of economic growth so that it becomes more productive and is supported by sustainable investment.
Enhancing competitiveness, simplifying licensing procedures, ensuring legal certainty, and maintaining consistent industrial policies are essential prerequisites for strengthening investor confidence.
“Without structural reforms, economic growth of around 5 percent risks being viewed as stagnant, especially as competing countries such as India and Vietnam continue to deliver higher growth rates alongside increasingly competitive investment climates,” he said.
Inflation Remains Within Bank Indonesia’s Target Range
On inflation, the IMF projects Indonesia’s inflation rate at around 3 percent in 2026, which remains within Bank Indonesia’s target range of 2.5 percent ±1 percent.
According to Rizal, this suggests that demand-side inflationary pressures remain relatively well contained, partly because economic growth has not been excessively strong.
However, he warned that inflation risks continue to stem from external and supply-side factors, including a weakening rupiah, rising global energy and food prices, supply chain disruptions, and possible adjustments to government-administered prices.
Therefore, maintaining price stability will largely depend on the government’s ability to ensure adequate food supplies, stabilize the exchange rate, and manage energy policies effectively so that inflation remains within the target range.
Indonesia Still Outperforms Regional Average Despite Missing Government Target
In its latest World Economic Outlook (WEO) Update: Global Economy in Crosscurrents of War and Technology, released in July 2026, the IMF maintained its economic growth forecast for Indonesia unchanged from its April 2026 WEO projections.
The IMF also forecasts Indonesia’s GDP to grow by 5.1 percent in 2027.
Indonesia’s projected economic growth remains above the average forecast for Emerging and Developing Asia, which is expected to slow to 4.8 percent in 2026.
Indonesia is also projected to outperform the average growth of the ASEAN-5 economies—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—which are expected to expand by only 4.3 percent this year.
Nevertheless, the IMF’s 5.0 percent forecast remains below the government’s official target. Under the 2026 State Budget (APBN), the government and the House of Representatives have set an economic growth target of 5.4 percent.
The IMF also projects a slowdown in global economic growth this year. Global output is expected to expand by 3.0 percent in 2026 before gradually recovering to 3.4 percent in 2027.
The report notes that global economic activity and prospects are currently being shaped by two major forces moving in opposite directions.
“First, a negative supply shock caused by the war in the Middle East. Second, an ongoing positive technology shock, reflected in the accelerating momentum of the global technology cycle, largely driven by advances in and the widespread adoption of artificial intelligence (AI),” the IMF wrote.
Although the global economy has so far proven more resilient than expected in the face of uncertainty, the IMF cautioned that the balance of risks to the economic outlook remains tilted to the downside.
The primary risks stem from the potential escalation of conflict in West Asia, which could prolong commodity price volatility, disrupt global supply chains, drive up prices, and place additional strain on financial conditions.***
